GLOBAL MARKETS-Shares tumble after weak euro zone, U.S. data

* Wall Street falls after raft of data, Fed policy
uncertainty
* Euro zone recovery hopes dealt a blow in Feb-data
* Commodities join selloff, safe haven assets gain
By Angela Moon
NEW YORK, Feb 21 Global equity markets tumbled
on Thursday following a glut of data from Europe and the U.S.
that pointed to slow economic growth but failed to ease concerns
the U.S. Federal Reserve may begin to withdraw the stimulus that
fuelled the recent equity rally.
The latest bout of selling came after data showed the number
of Americans filing new claims for unemployment benefits rose
last week while consumer prices were flat in January.
In Europe, a surprisingly weak euro zone Purchasing Managers
Index (PMI) data for February dashed hopes of an early recovery
for the recession-hit region.
The combination of factors put the MSCI world equity index
on course for its biggest daily loss of year.
The Dow Jones industrial average was down 52.00
points, or 0.37 percent, at 13,875.54. The Standard & Poor's 500
Index was down 6.86 points, or 0.45 percent, at
1,505.09. The Nasdaq Composite Index was down 16.93
points, or 0.53 percent, at 3,147.48.
The S&P 500 index dropped 1.2 percent on Wednesday, its
biggest decline since Nov. 14, after minutes from the U.S.
Federal Reserve's most recent meeting suggested the central bank
may slow or stop buying bonds sooner than expected.
The benchmark S&P index is down 1.9 percent in the past two
sessions but is still up more than 5 percent for the year,
leading many analysts to view the Fed minutes as one of the
triggers for an overdue pullback in equities, along with the
upcoming sequestration in Washington and a decrease in consumer
spending.
The sequestration - automatic across-the-board spending cuts
put in place as part of a larger congressional budget fight -
are due to kick in March 1 unless lawmakers agree on an
alternative.
"It's the sequester, it's the knee-jerk reaction to
yesterday's Fed minutes and it's the realization the consumer is
slowing," said Phil Orlando, chief equity market strategist, at
Federated Investors in New York.
"I'd love to see a healthy 5 percent correction," he said.
"Let's wash out some of the weak hands and set up for a better
move during the year."
In other data, financial data firm Markit said its "flash,"
or preliminary, U.S. Manufacturing Purchasing Managers Index
slowed to 55.2 this month from 55.8, which had been the best
showing since April, 2012.
Europe's Eurofirst 300 index shed 1.3 percent,
close to its biggest daily loss of the year so far, while
London's FTSE 100, Paris's CAC-40 and
Frankfurt's DAX were as much as 1.8 percent lower.
Emerging stocks were at their lowest levels since December
as signs of a monetary tightening in China added to the growth
and Fed policy concerns; traders speculated on a shift in
monetary policy after China's central bank conducted a record
high liquidity draining operation from the banking system.
A statement by outgoing premier Wen Jiabao expressing
renewed concern about housing prices has also fuelled concerns
that monetary policy may soon tighten.
EURO TUMBLES
The euro dropped to a six-week low against the dollar and a
three-week trough against the yen on Thursday in the wake of
data showing a struggling euro zone economy and amid uncertainty
ahead of Italy's election at the weekend.
Expectations that the U.S. Federal Reserve may stop
providing monetary stimulus also helped the dollar gain broadly.
"The PMI news is not good and shows the euro zone is under
economic duress and you add to the current uncertainty ahead of
the Italian elections and we have a euro that is struggling to
get ahead," said Matthew Lifson, senior trader and analyst at
Cambridge Mercantile Group in Princeton, New Jersey.
Prospects about a fragmented parliament after Italy's
national election could trigger a sell-off in the peripheral
bond market and weigh on the euro.
The euro dropped around 0.8 percent to $1.3166, its
lowest since Jan. 10, and well below a 15-month peak of $1.3711
reached on Feb. 1. The euro last traded at $1.3199, down 0.6
percent.
Against the yen, the euro fell to 122.23 yen, its weakest
since late January. It was last at 123.03, down 1 percent.
In commodity markets, oil fell to a three-week low below
$114 a barrel on Thursday.
The drop extended Brent crude's largest one-day slide in
2013 on Wednesday, alongside declines in other commodities and
equities. Rumours that a hedge fund was liquidating positions
also had helped pressure prices, although there was no evidence
of liquidation by any specific fund.
Brent crude fell as low as $113.50, the lowest
intra-day price since Jan. 29. U.S. crude slipped by
$2.18 to $93.04.
U.S. Treasuries extended price gains on Thursday, with the
benchmark 10-year Treasury notes trading 12/32
higher in price to yield 1.97 percent, down from 2.01 percent
late Wednesday.

Next In Bonds News

NEW YORK, Dec 9 U.S. Treasury debt yields
touched session lows early Friday in step with German yields in
the wake of a Reuters report on the European Central Bank has
rejected request from Italy's Monte Paschi for more time to
raise cash.

BRUSSELS, Dec 9 Europe's economic and
demographic weight in the world is diminishing and its nations
will disappear in time unless they stand together in the
European Union, European Commission President Jean-Claude
Juncker said on Friday.

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